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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------



| | For the quarterly period ended September 30, 2003
| | -------------------------------------------------



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------



| | For the transition period from  to
| | ----------------------------------



Commission File No. 000-31711



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BOE FINANCIAL SERVICES

OF VIRGINIA, INC.

(Exact name of
small business issuer as specified in its charter)



|Virginia                                 |  | 54-1980794         
|---------------------------------------- |  | -------------------
|(State or other jurisdiction of          |  | (IRS Employer      
|incorporation or organization)           |  | Identification No.)
|                                         | 
|323 Prince St., Tappahannock, VA         |  | 22560              
|(Address of principal executive offices) |  | (Zip Code)         



(804) 443-4343

(Issuers telephone number, including area code)



---



Check whether the issuer (1)filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.    Yes  x    No ̈



State the number of shares
outstanding of each of the issuers classes of common equity as of November 3, 2003.



|Class                         |  | Outstanding at November 3, 2003
|----------------------------- |  | -------------------------------
|Common Stock, $5.00 par value |  | 1,181,043                      



Transitional Small
Business Disclosure Format (Check one):    Yes ̈No  x



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##### Table of Contents

BOE Financial Services of Virginia, Inc.



FORM 10-QSB



INDEX



PART IFINANCIAL INFORMATION



|                                                                                                         |  | Page 
|-------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                         | 
|Item 1.    
Financial Statements                                                                         |  | 1-6  
|                                                                                                         | 
|Consolidated Balance Sheets September 30, 2003 and December 31, 2002                                     |  | 1-2  
|                                                                                                         | 
|Consolidated Statements of Earnings Three months ended September 30, 2003 and 2002                       |  | 3    
|                                                                                                         | 
|Consolidated Statements of Earnings Nine months ended September 30, 2003 and 2002                        |  | 4    
|                                                                                                         | 
|Consolidated Statements of Cash Flows Nine months ended September 30, 2003 and 2002                      |  | 5    
|                                                                                                         | 
|Consolidated Statements of Changes in Stockholders Equity Nine months ended September 30, 2003 and 2002 |  | 6    
|                                                                                                         | 
|Notes to Consolidated Financial Statements                                                               |  | 7-9  
|                                                                                                         | 
|Item 2.    
Managements Discussion and Analysis or Plan of Operation                                    |  | 9-14 
|                                                                                                         | 
|Item 3.    
Controls and Procedures                                                                      |  | 14   
|                                                                                                         | 
|PART IIOTHER INFORMATION                                                                                |  |      
|                                                                                                         | 
|Item 1.    
Legal Proceedings                                                                            |  | 14   
|                                                                                                         | 
|Item 2.    
Changes in Securities                                                                        |  | 14   
|                                                                                                         | 
|Item 3.    
Defaults Upon Senior Securities                                                              |  | 14   
|                                                                                                         | 
|Item 4.    
Submission of Matters to a Vote of Security Holders                                          |  | 14   
|                                                                                                         | 
|Item 5.    
Other Information                                                                            |  | 14   
|                                                                                                         | 
|Item 6.    
Exhibits and Reports on Form 8-K                                                             |  | 14-15
|                                                                                                         | 
|Signatures                                                                                               |  | 16   
|                                                                                                         | 
|Certifications of Chief Executive Officer and Chief Financial Officer                                    |  | 17-19







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##### Table of Contents

PART I  FINANCIAL INFORMATION



Item 1.  Financial St
atements

BOE FINANCIAL SERVICES OF VA., INC.

Consolidated Balance Sheets

(in Thousands, except per share information)



|                                                                                                        |  | September 30, 2003 |         |   | December 31, 2002 |  
|------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | -
|ASSETS                                                                                                  |  | (Unaudited)        |         |   |                   |  
|Cash and due from banks                                                                                 |  | $                  | 8,295   |   |                   | $
|Federal funds sold                                                                                      |  |                    | 7,151   |   |                   |  
|Securities available for sale                                                                           |  |                    |         |   |                   |  
|U.S. Treasury and U.S. Government agencies and corporations (book value of $9,810-2003 and $8,874-2002) |  |                    | 9,836   |   |                   |  
|Obligations of state and political subdivisions (book value of $30,101-2003 and $28,647-2002)           |  |                    | 31,646  |   |                   |  
|Other Securities (book value of $5,010-2003 and $5,576-2002)                                            |  |                    | 5,462   |   |                   |  
|                                                                                                        |  |                   
|Loans held for resale                                                                                   |  |                    | 1,237   |   |                   |  
|                                                                                                        |  |                   
|Loans                                                                                                   |  |                    | 157,028 |   |                   |  
|Less: Allowance for loan losses                                                                         |  |                    | (2,179  | ) |                   |  
|                                                                                                        |  |                    |         |   |                   |  
|Net loans                                                                                               |  |                    | 154,849 |   |                   |  
|                                                                                                        |  |                   
|Bank premises and equipment, net                                                                        |  |                    | 6,574   |   |                   |  
|Accrued interest receivable                                                                             |  |                    | 1,222   |   |                   |  
|Intangible assets, net                                                                                  |  |                    | 933     |   |                   |  
|Other assets                                                                                            |  |                    | 2,694   |   |                   |  
|                                                                                                        |  |                    |         |   |                   |  
|Total assets                                                                                            |  | $                  | 229,899 |   |                   | $
|                                                                                                        |  |                    |         |   |                   |  



See accompanying notes
to consolidated financial statements.



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BOE FINANCIAL SERVICES OF VA., INC

Consolidated Balance Sheets



|                                           |  | September 30,2003 |         | December 31, 2002
|------------------------------------------ |  | ----------------- | ------- | -----------------
|LIABILITIES AND STOCKHOLDERS EQUITY       |  | (Unaudited)       |         |                  
|Deposits                                   |  |                   |         |                  
|Noninterest bearing deposits               |  | $                 | 22,077  |                  
|Interest bearing deposits                  |  |                   | 179,491 |                  
|                                           |  |                   |         |                  
|Total deposits                             |  |                   | 201,568 |                  
|                                           |  |                  
|Federal Home Loan Bank advances            |  |                   | 4,000   |                  
|Accrued interest payable                   |  |                   | 400     |                  
|Other liabilities                          |  |                   | 1,318   |                  
|                                           |  |                   |         |                  
|Total liabilities                          |  |                   | 207,286 |                  
|                                           |  |                   |         |                  
|                                           |  |                  
|Commitments                                |  |                   |         |                  
|Stockholders equity                       |  |                   |         |                  
|Common stock, $5.00 par value              |  |                   | 5,904   |                  
|                                           |  |                   |         |                  
|                                           |  | 9/30/03           |         | 12/31/02         
|Shares auth.                               |  | 10,000,000        |         | 10,000,000       
|Shares o/s                                 |  | 1,180,861         |         | 1,177,849        
|Paid in capital                            |  |                   | 4,971   |                  
|Accumulated other comprehensive income     |  |                   | 1,336   |                  
|Retained earnings                          |  |                   | 10,402  |                  
|                                           |  |                   |         |                  
|                                           |  |                  
|Total stockholders equity                 |  |                   | 22,613  |                  
|                                           |  |                   |         |                  
|Total liabilities and stockholders equity |  | $                 | 229,899 |                  
|                                           |  |                   |         |                  



See accompanying notes
to consolidated financial statements.



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BOE FINANCIAL SERVICES OF VA., INC.

Consolidated Statements of Earnings

(in Thousands, except per share information)



|                                                                 |  | Three Months Ended September 30, |      
|---------------------------------------------------------------- |  | -------------------------------- | -----
|                                                                 |  | 2003                             |      
|                                                                 |  | (Unaudited)                      |      
|Interest Income                                                  |  |                                  |      
|Interest and fees on loans                                       |  | $                                | 2,754
|Interest on federal funds sold                                   |  |                                  | 9    
|Interest on U.S. Treasury securities and U.S. Agency Obligations |  |                                  | 69   
|Interest on obligations of state and political subdivisions      |  |                                  | 302  
|Interest on other securities                                     |  |                                  | 113  
|                                                                 |  |                                  |      
|Total interest income                                            |  |                                  | 3,247
|                                                                 |  |                                 
|Interest Expense                                                 |  |                                  |      
|Interest on savings and interest bearing deposits                |  |                                  | 107  
|Interest on certificates of deposit                              |  |                                  | 853  
|Interest on federal funds purchased                              |  |                                  |     
|Interest Federal Home Loan Bank advances                         |  |                                  | 27   
|                                                                 |  |                                  |      
|Total interest expense                                           |  |                                  | 987  
|                                                                 |  |                                  |      
|Net interest income                                              |  |                                  | 2,260
|Provision for loan losses                                        |  |                                  | 150  
|                                                                 |  |                                  |      
|Net interest income after provision for loan losses              |  |                                  | 2,110
|                                                                 |  |                                  |      
|Noninterest Income                                               |  |                                  |      
|Service charges on deposit accounts                              |  |                                  | 258  
|Gains on sale of loans                                           |  |                                  | 22   
|Other fee income                                                 |  |                                  | 53   
|All other noninterest income                                     |  |                                  | 70   
|                                                                 |  |                                  |      
|Total noninterest income                                         |  |                                  | 403  
|                                                                 |  |                                  |      
|Noninterest Expense                                              |  |                                  |      
|Salaries and employee benefits                                   |  |                                  | 933  
|Premises and fixed assets                                        |  |                                  | 222  
|Intangible premium amortization                                  |  |                                  | 31   
|Other expenses                                                   |  |                                  | 538  
|                                                                 |  |                                  |      
|Total noninterest expense                                        |  |                                  | 1,724
|                                                                 |  |                                  |      
|Income before income taxes                                       |  |                                  | 789  
|Income tax provision (benefit)                                   |  |                                  | 190  
|                                                                 |  |                                  |      
|Net income                                                       |  | $                                | 599  
|                                                                 |  |                                  |      
|Earnings per share, basic                                        |  | $                                | 0.51 
|Earnings per share, diluted                                      |  | $                                | 0.50 



See accompanying notes
to consolidated financial statements.



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BOE FINANCIAL SERVICES OF VA., INC.

Consolidated Statements of Earnings

(in Thousands, except per share information)



|                                                                 |  | Nine Months Ended September 30, |      
|---------------------------------------------------------------- |  | ------------------------------- | -----
|                                                                 |  | 2003                            |      
|                                                                 |  | (Unaudited)                     |      
|Interest Income                                                  |  |                                 |      
|Interest and fees on loans                                       |  | $                               | 8,423
|Interest on federal funds sold                                   |  |                                 | 17   
|Interest on U.S. Treasury securities and U.S. Agency Obligations |  |                                 | 212  
|Interest on obligations of state and political subdivisions      |  |                                 | 979  
|Interest on other securities                                     |  |                                 | 279  
|                                                                 |  |                                 |      
|Total interest income                                            |  |                                 | 9,910
|Interest Expense                                                 |  |                                 |      
|Interest on savings and interest bearing deposits                |  |                                 | 354  
|Interest on certificates of deposit                              |  |                                 | 2,734
|Interest on federal funds purchased                              |  |                                 | 4    
|Interest Federal Home Loan Bank advances                         |  |                                 | 82   
|                                                                 |  |                                 |      
|Total interest expense                                           |  |                                 | 3,174
|                                                                 |  |                                 |      
|Net interest income                                              |  |                                 | 6,736
|Provision for loan losses                                        |  |                                 | 550  
|                                                                 |  |                                 |      
|Net interest income after provision for loan losses              |  |                                 | 6,186
|                                                                 |  |                                 |      
|Noninterest Income                                               |  |                                 |      
|Service charges on deposit accounts                              |  |                                 | 610  
|Securities gains (losses)-net                                    |  |                                 | 22   
|Gains on sale of loans                                           |  |                                 | 63   
|Other fee income                                                 |  |                                 | 193  
|All other fee & noninterest income                               |  |                                 | 196  
|                                                                 |  |                                 |      
|Total noninterest income                                         |  |                                 | 1,084
|                                                                 |  |                                 |      
|Noninterest Expense                                              |  |                                 |      
|Salaries and employee benefits                                   |  |                                 | 2,757
|Premises and fixed assets                                        |  |                                 | 646  
|Other expenses                                                   |  |                                 | 1,497
|Intangible premium amortization                                  |  |                                 | 94   
|                                                                 |  |                                 |      
|Total noninterest expense                                        |  |                                 | 4,994
|                                                                 |  |                                 |      
|Income before income taxes                                       |  |                                 | 2,276
|Income taxes                                                     |  |                                 | 503  
|                                                                 |  |                                 |      
|Net income                                                       |  | $                               | 1,773
|                                                                 |  |                                 |      
|Earnings per share, basic                                        |  | $                               | 1.50 
|Earnings per share, diluted                                      |  | $                               | 1.49 



See accompanying notes
to consolidated financial statements.



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BOE FINANCIAL SERVICES OF VA., INC.

Consolidated Statements of Cash Flows

(in Thousands)



|                                                                                  |  | Nine Months Ended September 30, |       
|--------------------------------------------------------------------------------- |  | ------------------------------- | ------
|                                                                                  |  | 2003                            |       
|                                                                                  |  | (Unaudited)                     |       
|Cash Flows from Operating Activities                                              |  |                                 |       
|Net income                                                                        |  | $                               | 1,773 
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |       
|Depreciation and amortization                                                     |  |                                 | 372   
|Origination of loans held for sale                                                |  |                                 | (9,167
|Proceeds from sale of loans held for sale                                         |  |                                 | 8,998 
|Provision for loan losses                                                         |  |                                 | 550   
|Net amortization on securities                                                    |  |                                 | 161   
|Net (gain) loss on sale of securities                                             |  |                                 | (22   
|(Gain) loss on sale of loans                                                      |  |                                 | (63   
|(Increase) decrease in accrued interest receivable and other assets               |  |                                 | 1,307 
|Increase (decrease) in accrued expenses and other liabilities                     |  |                                 | 214   
|                                                                                  |  |                                 |       
|                                                                                  |  |                                
|Net cash provided by operating activities                                         |  |                                 | 4,123 
|                                                                                  |  |                                 |       
|Cash Flows from Investing Activities                                              |  |                                 |       
|Proceeds from sale of securities available-for-sale                               |  |                                 | 561   
|Proceeds from maturities and calls of securities available-for-sale               |  |                                 | 4,607 
|Purchase of securities available for sale                                         |  |                                 | (8,590
|Net decrease (increase) in loans to customers                                     |  |                                 | 6,936 
|(Increase) in federal funds sold                                                  |  |                                 | (4,846
|Capital expenditures                                                              |  |                                 | (142  
|                                                                                  |  |                                 |       
|                                                                                  |  |                                
|Net cash (used in) investing activities                                           |  |                                 | (1,474
|                                                                                  |  |                                 |       
|Cash Flows from Financing Activities                                              |  |                                 |       
|Net increase in deposits                                                          |  |                                 | 307   
|Proceeds from issuance of common stock                                            |  |                                 | 55    
|Dividends paid                                                                    |  |                                 | (319  
|                                                                                  |  |                                 |       
|                                                                                  |  |                                
|Net cash provided by financing activities                                         |  |                                 | 43    
|                                                                                  |  |                                 |       
|Net increase in cash and cash equivalents                                         |  |                                 | 2,692 
|Cash and Cash Equivalents                                                         |  |                                 |       
|Beginning of period                                                               |  |                                 | 5,603 
|                                                                                  |  |                                 |       
|End of period                                                                     |  | $                               | 8,295 
|                                                                                  |  |                                 |       
|                                                                                  |  |                                
|Supplemental disclosure of cash flow information                                  |  |                                 |       
|Cash paid during the year                                                         |  |                                 |       
|Interest                                                                          |  | $                               | 3,267 
|                                                                                  |  |                                 |       
|Income Taxes                                                                      |  | $                               | 434   
|                                                                                  |  |                                 |       



See accompanying notes
to consolidated financial statements.



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BOE Financial Services of Virginia, Inc.

Consolidated Statement of Changes in Stockholders Equity

For the Nine Month Periods Ended
September 30, 2003 and 2002

(in thousands)

(Unaudited)



|                                                                                |  | CommonStock  |       | Paid-InCapital |   | RetainedEarnings  |  |   | Accumulated Other ComprehensiveIncome |   |  | ComprehensiveIncome |       |   | Total |  
|------------------------------------------------------------------------------- |  | ------------ | ----- | -------------- | - | ----------------- |  | - | ------------------------------------- | - |  | ------------------- | ----- | - | ----- | -
|Balance, December 31, 2001                                                      |  | $            | 5,870 |                | $ | 4,875             |  | $ | 7,788                                 |   |  | $                   | 514   |   |       |  
|Comprehensive Income:                                                           |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Net income                                                                      |  |              |       |                |   |                   |  |   | 1,154                                 |   |  |                     |       |   |       | $
|Other comprehensive income, net of tax:                                         |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Unrealized gain on securities available for sale, net of deferred taxes of $608 |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|                                                                                |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Total comprehensive income                                                      |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|                                                                                |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Cash dividends, $0.26 per share                                                 |  |              |       |                |   |                   |  |   | (304                                  | ) |  |                     |       |   |       |  
|Issuance of common stock under dividend reinvestment plan                       |  |              | 9     |                |   | 28                |  |   |                                       |   |  |                     |       |   |       |  
|Issuance of common stock under Employee Stock Option Plan                       |  |              | 1     |                |   | 1                 |  |   |                                       |   |  |                     |       |   |       |  
|                                                                                |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Balance, September 30, 2002                                                     |  | $            | 5,880 |                | $ | 4,904             |  | $ | 8,638                                 |   |  | $                   | 514   |   |       |  
|                                                                                |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|                                                                                |  |              |       |                |   |                  
|                                                                                |  | Common Stock |       | Paid-InCapital |   | Retained Earnings |  |   | AccumulatedOtherComprehensiveIncome   |   |  | ComprehensiveIncome |       |   | Total |  
|Balance, December 31, 2002                                                      |  | $            | 5,889 |                | $ | 4,931             |  | $ | 8,948                                 |   |  | $                   | 1,578 |   |       |  
|Comprehensive Income:                                                           |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Net income                                                                      |  |              |       |                |   |                   |  |   | 1,773                                 |   |  |                     |       |   |       | $
|Other comprehensive income, net of tax:                                         |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Unrealized loss on securities available for sale, net of deferred taxes of $118 |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Reclassification adjustment, net of deferred taxes of $7                        |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|                                                                                |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Other comprehensive income, net of tax:                                         |  |              |       |                |   |                   |  |   |                                       |   |  |                     | (242  | ) |       |  
|                                                                                |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Total comprehensive income                                                      |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|                                                                                |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Cash dividends, $0.27 per share                                                 |  |              |       |                |   |                   |  |   | (319                                  | ) |  |                     |       |   |       |  
|Issuance of common stock under dividend reinvestment plan                       |  |              | 8     |                |   | 28                |  |   |                                       |   |  |                     |       |   |       |  
|Issuance of common stock under Employee Stock Option Plan                       |  |              | 7     |                |   | 12                |  |   |                                       |   |  |                     |       |   |       |  
|                                                                                |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  
|Balance, September 30, 2003                                                     |  | $            | 5,904 |                | $ | 4,971             |  | $ | 10,402                                |   |  | $                   | 1,336 |   |       |  
|                                                                                |  |              |       |                |   |                   |  |   |                                       |   |  |                     |       |   |       |  



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##### Table of Contents

BOE FINANCIAL SERVICES OF VA., INC.

Notes to Consolidated Financial Statements

(in Thousands)

(Unaudited)



1. The accounting and reporting policies of the registrant conform to accounting principles generally accepted in the United States of America and to the general
practices within the banking industry. The interim financial statements have not been audited; however, in the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the
consolidated financial statements, have been included. Operating results for the three month and nine month periods ended September 30, 2003 are not necessarily indicative of the results that may be expected for the year ended December 31, 2003.



These financial statements should be read in conjunction with
the financial statements and the footnotes included in the registrants 2002 Annual Report to Shareholders.



2. Earnings per share are based on the weighted average number of common shares and common stock equivalents outstanding during the applicable periods. The following is a
summary of the basic and diluted earnings per share calculation for the three and nine months ended September 30, 2003 and 2002:



|                                  |  | Three months ended September 30, |       | Nine months ended September 30,
|--------------------------------- |  | -------------------------------- | ----- | -------------------------------
|                                  |  | 2003                             |       | 2002                           
|Basic earnings per share:         |  |                                  |       |                                
|Net income                        |  | $                                | 599   |                                
|Average common shares outstanding |  |                                  | 1,181 |                                
|Basic net income per share        |  | $                                | 0.51  |                                
|Diluted earnings per share:       |  |                                  |       |                                
|Net income                        |  | $                                | 599   |                                
|Average common shares outstanding |  |                                  | 1,189 |                                
|Diluted net income per share      |  | $                                | 0.50  |                                



3. Loans are shown on the balance
sheets net of unearned discounts and the allowance for loan losses. Interest is computed by methods which result in level rates of return on principal. Loans are charged off when in the opinion of management they are deemed to be uncollectable after
taking into consideration such factors as the current financial condition of the customer and the underlying collateral and guarantees. Loan fees and origination costs are deferred and the net amount amortized as an adjustment of the related loans
yield using the level yield method. Bank of Essex (the Bank), a wholly owned subsidiary of the registrant, is amortizing these amounts over the contractual life of the related loans.



4. At September 30, 2003, the Company had a stock-based employee compensation plan. The
Company accounts for the plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all
options granted under the plan had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if the Corporation had applied the
fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.



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##### Table of Contents

|Nine months Ended September 30,                                                                                                   |  | 2003 |       |   | 2002 |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | -
|Net income, as reported                                                                                                           |  | $    | 1,773 |   |      | $
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of tax
effect |  |      | (31   | ) |      |  
|                                                                                                                                  |  |      |       |   |      |  
|Pro forma net income                                                                                                              |  | $    | 1,742 |   |      | $
|                                                                                                                                  |  |      |       |   |      |  
|Earnings per share:                                                                                                               |  |      |       |   |      |  
|Basic-as reported                                                                                                                 |  | $    | 1.50  |   |      | $
|                                                                                                                                  |  |      |       |   |      |  
|Basic-pro forma                                                                                                                   |  | $    | 1.48  |   |      | $
|                                                                                                                                  |  |      |       |   |      |  
|Diluted-as reported                                                                                                               |  | $    | 1.49  |   |      | $
|                                                                                                                                  |  |      |       |   |      |  
|Diluted-pro forma                                                                                                                 |  | $    | 1.47  |   |      | $
|                                                                                                                                  |  |      |       |   |      |  
|                                                                                                                                  |  |     
|Three months Ended September 30,                                                                                                  |  | 2003 |       |   | 2002 |  
|Net income, as reported                                                                                                           |  | $    | 599   |   |      | $
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of tax
effect |  |      | (10   | ) |      |  
|                                                                                                                                  |  |      |       |   |      |  
|Pro forma net income                                                                                                              |  | $    | 589   |   |      | $
|                                                                                                                                  |  |      |       |   |      |  
|Earnings per share:                                                                                                               |  |      |       |   |      |  
|Basic-as reported                                                                                                                 |  | $    | 0.51  |   |      | $
|                                                                                                                                  |  |      |       |   |      |  
|Basic-pro forma                                                                                                                   |  | $    | 0.50  |   |      | $
|                                                                                                                                  |  |      |       |   |      |  
|Diluted-as reported                                                                                                               |  | $    | 0.50  |   |      | $
|                                                                                                                                  |  |      |       |   |      |  
|Diluted-pro forma                                                                                                                 |  | $    | 0.50  |   |      | $
|                                                                                                                                  |  |      |       |   |      |  



5.
Recent Accounting Pronouncements



In November 2002, the FASB
issued FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). The Interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The Interpretation requires disclosure of the nature of the guarantee, the maximum potential amount of future payments that the guarantor could be required to make under the guarantee, and the current
amount of the liability, if any, for the guarantors obligations under the guarantee. The recognition requirements of the Interpretation were effective beginning January 1, 2003. Management does not anticipate that the recognition requirements
of this Interpretation will have a material impact on the Corporations consolidated financial statements.



In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). This
Interpretation provides guidance with respect to the identification of variable interest entities and when the assets, liabilities, noncontrolling interests, and results of operations of a variable interest entity need to be included in a
corporations consolidated financial statements. The Interpretation requires consolidation by business enterprises of variable interest entities in cases where the equity investment at risk is not sufficient to permit the entity to finance its
activities without additional subordinated financial support from other parties, which is provided through other interests that will absorb some or all of the expected losses of the entity, or in cases where the equity investors lack one or more of
the essential characteristics of a controlling financial interest, which include the ability to make decisions about the entitys activities through voting rights, the obligations to absorb the expected losses of the entity if they occur, or
the right to receive the expected residual returns of the entity if they occur. The Interpretation applies immediately to variable interest entities created after January 31, 2003, and applies to previously existing entities beginning in the fourth
quarter of 2003.



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Management is currently evaluating the applicability of FIN 46 but the adoption of this Interpretation is not expected to
have a material impact on the Corporations consolidated financial statements.



In April 2003, the Financial Accounting Standards Board issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement amends and clarifies financial accounting
and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. This Statement is effective for contracts entered into or modified after June 30, 2003 and is not expected to have an impact on the Corporations consolidated financial statements.



In May 2003, the Financial Accounting Standards Board issued Statement No.
150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This Statement is
effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instruments of
nonpublic entities. Adoption of the Statement did not result in an impact on the Companys consolidated financial statements.



Item 2. 
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION



CRITICAL ACCOUNTING POLICIES



General



The Companys financial statements are prepared in accordance with
accounting principles generally accepted in the United States (GAAP). The financial information contained within the statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and
events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. The Company uses historical loss factors as
one factor in determining the inherent loss that may be present in its loan portfolio. Actual losses could differ significantly from the historical factors that the Company uses. In addition, GAAP itself may change from one previously acceptable
method to another method. Although the economics of the Companys transactions would be the same, the timing of events that would impact its transactions could change.



Allowance for Loan Losses



The allowance for loan losses is an estimate of the losses that may be sustained in the Banks loan portfolio. The
allowance is based on two basic principles of accounting: (i) SFAS 5, Accounting for Contingencies,which requires that losses be accrued when they are probable of occurring and estimatable and (ii) SFAS 114, Accounting by Creditors for
Impairment of a Loan,which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance. The use of these
values is inherently subjective and actual losses could be greater or less than the estimates.



The allowance consists of specific, general and unallocated components. The specific components relate to loans that are classified as either doubtful or substandard. For such loans that are also classified as
impaired, an allowance is established when the discounted cash flows ( or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based
on historical loss experience adjusted for qualitative factors.



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An unallocated component is maintained to cover uncertainties that could affect managements estimate of losses. The
unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio



The allowance for loan losses is increased by charges to income and decreased
by charge-offs (net of recoveries). Managements periodic evaluation of the adequacy of the allowance is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers
ability to repay, the estimated value of any underlying collateral, and current economic conditions.



Intangibles



In July, 2001, the Financial Accounting Standards Board issued two statements  Statement 141, Business Combinations,and Statement
142, Goodwill and Other Intangible Assets,which impacted the accounting for goodwill and other intangible assets. Statement 141 eliminated the pooling method of accounting for business combinations and required that intangible assets that
meet certain criteria be reported separately from goodwill. Statement 142 eliminated the amortization of goodwill and other intangibles that are determined to have an indefinite life. The Statement requires, at a minimum, annual impairment tests for
goodwill and other intangible assets that are determined to have an indefinite life.



Subsequent to the effective date of SFAS 142 an apparent conflict with SFAS 72 was raised as an issue, which allowed certain intangibles arising from bank and thrift acquisitions to be amortized over their estimated
useful lives.



Upon adoption of these Statements, the Company
re-evaluated its intangible assets that arose from branch acquisitions prior to July 1, 2001. It was determined that the intangible assets arising from branch acquisitions will continue to be amortized over their estimated lives in accordance with
SFAS 72.



The following discussion is intended to assist
readers in understanding and evaluating the financial condition and results of operations of BOE Financial Services of Virginia, Inc. (BOE or the Company and the Bank). This section should be read in conjunction with
BOEs consolidated financial statements and accompanying notes included elsewhere in this report.



Overview



On September 30, 2003, BOE had total assets of $229.9 million, an increase of $1.8 million or 0.8%, from $228.1 million at December 31, 2002. Total assets
at September 30, 2002 were $231.3 million. The September 30, 2003 total assets figure represents a decrease of 0.6% or $1.4 million over one year ago.



Total loans amounted to $157.0 million on September 30, 2003, a decrease of $6.8 million, or 4.2% less than the December 31, 2002 total loans of $163.8
million. This September 30, 2003 figure represents a decrease of $5.0 million or 3.1% from total loans of $162.1 million on September 30, 2002.



The Companys securities portfolio increased $1.5 million, or 3.2% from $45.5 million at December 31, 2002 to $46.9 million at September 30, 2003.
Total securities were $43.6 million on September 30, 2002. Federal funds sold were $7.2 million on September 30, 2003; at December 31, 2002 BOE had sold $2.3 million of federal funds. The Bank had federal funds sold of $8.1 million as of September
30, 2002.



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The Company is required to account for the effect of market changes in the value of securities
available-for-sale (AFS) under SFAS 115. The market value of the September 30, 2003 securities AFS portfolio was $46.9 million compared to $45.5 million at December 31, 2002 and $43.6 million at September 30, 2002. The impact of the change in market
value of AFS securities, net of deferred income taxes, is reflected in the Statement of Changes in Stockholders Equity under Accumulated Other Comprehensive Income. On September 30, 2003, the Companys net unrealized gain on AFS
securities represented $1.3 million, compared to $1.6 million at December 31, 2002 and a net unrealized gain of $2.6 million at September 30, 2002.



Total deposits at September 30, 2003 were $201.6 million. This $307,000 increase is 0.2% greater than total deposits of $201.3 million at December 31,
2002 and $1.4 million, or 0.7% greater than total deposits of $200.1 million at September 30, 2002.



Stockholders equity at September 30, 2003 was $22.6 million and represented 9.8% of total assets. Stockholders equity was $21.3 million, or
9.4% of total assets at December 31, 2002, and $21.1 million, or 9.1% of total assets at September 30, 2002.



Results of Operations



Net Income



Net income was $599,000 for the third quarter of 2003, or $0.50 per diluted share. This compares to net income of $119,000, or $0.10 per diluted share in
the third quarter of 2002. The increase in earnings for the third quarter of 2003 over 2002 was $480,000, or 403.4%.



The increase in quarterly earnings was primarily attributable to a $698,000, or 82.3%, reduction in provision for loan losses in the third quarter of 2003
compared to the same period in 2002. During the third quarter of 2002 additional provision expense was booked in recognition of a slower economy, and deterioration in certain loans, $689,000 of which were charged-off during the quarter. A more
uniform and stringent approach in recognizing and recording nonperforming assets was adopted at that time. Additionally having a positive effect on net income in the third quarter of 2003 was an increase of 13.9%, or $276,000, in net interest income
over the same period in 2002. Net interest income was $1.984 million in the third quarter of 2002 and increased to $2.260 million for the third quarter of 2003. Noninterest income increased $55,000, or 15.8%, from $348,000 to $403,000 from the third
quarter of 2002 to the same period in 2003.



These increases in
quarterly earnings were offset by a decrease in noninterest expenses of $292,000, or 20.4%



For the nine month comparison period ended September 30, 2003 the Company had net income of $1.773 million compared to $1.154 million for the nine month period ended September 30, 2002. This represents an increase of
$619,000, or 53.6%. Diluted earnings per share were $1.49 for the nine month period ending September 30, 2003 compared to $0.98 for the same period in 2002.



The increase in earnings for the first nine months of 2003 was attributable to an increase of 14.1%, or $832,000, in net interest income. Net interest
income was $6.736 million for the third quarter of 2003 comparison period and $5.904 million for 2002. The increase in net interest income for 2003 over 2002 was the result of a 35 basis point increase in the Banks net interest margin.
Additionally, noninterest income was $1.084 million for the 2003 comparison period and $949,000 for the same period in 2002, an increase of $135,000, or 14.2%. Provision for loan losses decreased from $1.118 million for the first nine months of 2002
to $550,000 for the same period in 2003.



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Offsetting these increases to net income was an increase of 14.3%, or $626,000, in the Companys
noninterest expenses. The Company had $4.994 million in noninterest expenses for the first nine months of 2003 compared to $4.368 million for the same period in 2002. Income taxes were $503,000 for the first nine months of 2003 compared to $213,000
during the 2002 comparison period. This represented an increase of 136.2%, or $290,000.



Net Interest Income



The Companys results of operations are significantly affected by its ability to manage effectively the interest rate sensitivity and maturity of its
interest-earning assets and interest-bearing liabilities. At September 30, 2003, the Companys interest-earning assets exceeded its interest-bearing liabilities by approximately $27.8 million, compared with a $28.8 million excess one year
ago. Net interest margins were 4.20% through September 30, 2003 compared to 3.85% through September 30, 2002 as determined through an internal margin calculation.



Annualized net interest income on a tax-equivalent basis through nine months of 2003 increased by 13.4% to $8.9 million from
$7.9 million for the same period a year ago. (The Company uses a 34% federal tax rate to compute yields on tax-exempt securities.) Through the first nine months of 2003 the Companys yield on earning assets was 6.18%, down from 6.70% a year
ago, while its cost of average interest bearing liabilities decreased from 3.21% to 2.26% during the same period. The Bank has outstanding a one year line of credit from the Federal Home Loan Bank of Atlanta for $4,000,000. The cost of this
borrowing is 2.75%. The Companys average loan-to-deposit ratio has decreased from 82.7% for the nine month period ended September 30, 2002 to 81.6% for the same period ended September 30, 2003.



Provision for Loan Losses



The Companys provision for loan losses decreased to $150,000 for the
third quarter of 2003 compared to $848,000 in the third quarter of 2002. The third quarter of 2002 resulted in a higher than historical provision for loan losses in recognition of a slower economy, and deterioration in certain loans, $689,000 of
which were charged-off during the quarter. For the nine month period ended September 30, 2003 the Company had expensed $550,000 to its provision compared to $1.1 million for the same period in 2002. Net charged-off loans were $486,000 in the first
nine months of 2003 and $1.1 million in the first nine months of 2002. The allowance for loan losses as a percentage of total loans was 1.39%, 1.29%, and 1.34%, respectively as of September 30, 2003, December 31, 2002 and September 30, 2002.



Noninterest Income



Noninterest income, including gains/(losses) on securities, was $403,000 for
the third quarter of 2003 compared to $348,000 in the same period of 2002. This represented an increase of 15.8%, or $55,000. All other noninterest income was $70,000 for the third quarter of 2003 compared to $135,000 for the same period in 2002.
This represented a decrease of $65,000, or 48.1%. This reduction in all other noninterest income resulted from a $51,000 credit to gains/(losses) on fixed assets in 2002 and in 2003 from the continued reduction in Cash Flow Manager receivable
financing income as the Company is gradually discontinuing this line of business.



On a year-to-date basis noninterest income increased 14.2%, or $135,000, from $949,000 for the first nine months of 2002 to $1,084,000 for the same period in 2003.



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Noninterest Expenses



Noninterest expenses increased $292,000, or 20.4%, from $1.4 million in the third quarter of 2002 to $1.7 million in the
third quarter of 2003. Salaries and employee benefits comprised the largest component of this increase, $158,000, or 20.4%, from $775,000 in the third quarter of 2002 to $933,000 in the third quarter of 2003. This component increase was a result of
additional personnel, salary increases and escalating health care costs. Other expenses increased $118,000, or 28.1%, from $420,000 in the first nine months of 2002 to $538,000 for the same period in 2003.



For the nine month period ended September 30, 2003, noninterest expenses
increased $626,000, or 14.3%, to $5.0 million in the 2003 comparison period from $4.4 million in 2002. Salaries and employee benefits were the major component of this increase, $448,000, or 19.4%, from $2.3 million in the 2002 comparison period to
$2.8 million in the first nine months of 2003.



Income Taxes



Income tax expense for the third
quarter of 2003 was $190,000. This represents an increase of $257,000 compared to a credit of $67,000 for the third quarter of 2002.



For the nine month period ended September 30, 2003 income tax expense totaled $503,000 compared to $213,000 through nine months in 2002. This is an
increase of $290,000 or 136.2%.



Asset Quality



The Companys allowance for loan losses totaled $2.2
million on September 30, 2003 or 1.39% of total loans, as compared to 1.29% at December 31, 2002 and 1.34% on September 30, 2002. This increase in the Companys allowance as a percentage of total loans is due to a decrease in total loans from
$162.1 million on September 30, 2002 to $157.0 million on September 30, 2003 and $2.2 million in the allowance account at the end of each of these September 30th comparison periods. On September 30, 2003, the Company had non-accruing loans of $1.853
million compared to $350,000 on September 30, 2002. Loans past due 90 days or more and still accruing interest totaled $663,000 on September 30, 2003 compared to $1.2 million on September 30, 2002. The increase in non-accruing loans for September
30, 2003 over September 30, 2002 corresponds to the decrease in loans past due 90 days or more and still accruing interest for the same period. At September 30, 2002, the Bank adopted a much stricter policy for placing loans on non-accruing status.



Capital Requirements



The determination of capital adequacy depends upon a number of factors, such
as asset quality, liquidity, earnings, growth trends and economic conditions. The Bank seeks to maintain a strong capital base to support its growth and expansion plans, provide stability to current operations and promote public confidence in the
Bank.



The federal banking regulators have defined three tests
for assessing the capital strength and adequacy of banks, based on two definitions of capital. Tier 1 Capital is defined as a combination of common and qualifying preferred stockholders equity less goodwill. Tier 2
Capital is defined as qualifying subordinated debt and a portion of the allowance for loan losses. Total Capital is defined as Tier 1 Capital plus Tier 2 Capital.



Three risk-based capital ratios are computed using the above capital definitions, total assets and risk-weighted assets and
are measured against regulatory minimums to ascertain adequacy. All assets and off-balance sheet risk items are grouped into categories according to degree of risk and assigned a risk-weighting and the resulting total is risk-weighted assets.
Tier 1 Risk-based Capital is Tier 1 Capital divided by risk-weighted assets. Total Risk-based Capital is Total Capital divided by risk-weighted assets. The Leverage ratio is Tier 1 Capital divided by total average assets.



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At September 30, 2003, the Banks ratio of total capital to risk-weighted assets was 12.60% and its
ratio of Tier 1 Capital to risk-weighted assets was 11.37%. The Banks leverage ratio (Tier I capital to average adjusted total assets) was 8.65%. These ratios exceed regulatory minimums.



Item 3.   
Controls and Procedures



As of the end
of the period covered by this report, the Company has carried out an evaluation, under the supervision and with the participation of the companys management, including the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14. Based on that evaluation, the Companys disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys periodic SEC filings. There have been no significant changes in the Companys internal
controls or in other factors that could significantly affect internal controls subsequent to the date the Company carried out its evaluation.



PART II  OTHER INFORMATION



Item 1. 
Legal Proceedings



None



Item 2. 
Changes in Securities



None



Item 3. Defa
ults Upon Senior Securities



None



Item 4.   
Submission of Matters to a Vote of Security Holders



None



Item 5.

Other Information



None



Item 6. 
Exhibits and Reports on Form 8-K



(a) Exhibit Listing



|ExhibitNumber |  |  |  | Description                                                                                                                                                                                                                                                                       
|------------- |  |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  | 
|2             |  |  |  | Agreement and Plan of Reorganization (the Reorganization Agreement) dated as of March 20, 2000 between the Corporation and Bank. (Exhibit A of the Proxy Statement
included in Form S-4 Registration Statement (No. 333-33260) filed March 24, 2000, incorporated by reference).
|              |  | 
|3(a)          |  |  |  | Articles of Incorporation of the Corporation (Appendix 1 to Exhibit A of the Proxy Statement included in Form S-4 Registration Statement (No. 333-33260) filed March 24, 2000,
incorporated by reference).                                                                        
|              |  | 
|3(b)          |  |  |  | Bylaws (Appendix 2 to Exhibit A of the Proxy Statement included in Form S-4 Registration Statement (No. 333-33260) filed March 24, 2000, incorporated by
reference).                                                                                                              





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|      | 
|----- | 
|10(a) | 
|      | 
|10(b) | 
|      | 
|10(c) | 
|      | 
|10(d) | 
|      | 
|31.1  | 
|      | 
|31.2  | 
|      | 
|32.   | 
|      | 
|99.1  | 



|(b) | Reports on Form 8-K.
|--- | --------------------



On October 27, 2003 the Company released its consolidated statement of earnings for the September 30, 2003 quarter to the same comparison period in
2002. Additionally, the Company released earnings through September 30 for the nine month period(s) in 2003 and 2002. The Company also disclosed its consolidated balance sheet for September 30, 2003 and September 30, 2002. A brief narrative of
the data accompanied the earnings release filed with the Commission on Form 8-K.



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##### Table of Contents

Signatures



In accordance with to the
requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                |  |  |  | BOE Financial Services of Virginia, Inc. (Registrant)
|--------------- |  |  |  | -----------------------------------------------------
|                |  |  | 
|11/14/03 (Date) |  |  |  | By:                                                  
|                |  |  |  |                                                      
|                |  |  |  |                                                      
|                |  |  |  |                                                      
|                |  |  |  |                                                      
|                |  |  | 
|11/14/03 (Date) |  |  |  | By:                                                  
|                |  |  |  |                                                      
|                |  |  |  |                                                      
|                |  |  |  |                                                      



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